Agere Systems Reports Results For Second Quarter Fiscal Year 2001

Company Also Announces 11 Percent Workforce Reduction



Apr 24, 2001, 01:00 ET from Agere Systems

    ALLENTOWN, Pa., April 24 /PRNewswire Interactive Press Release/ -- Agere
 Systems (NYSE:   AGR.A), the world leader in communications semiconductors,
 today reported its financial results for the second fiscal quarter of 2001.
 The company also announced today that it would reduce its workforce by
 approximately 2,000 employees.
     Revenues for the second fiscal quarter ended March 31, 2001, were
 $1.2 billion, up 12 percent from fiscal 2000 second quarter revenues of
 $1.1 billion, and down 13 percent sequentially from first quarter 2001
 revenues of $1.4 billion.
     Pro forma net income for the second quarter was $4 million, or
 approximately breakeven per share, compared to $83 million or $0.05 per share
 in the year-ago quarter.  Pro forma net income for the first fiscal quarter
 was $102 million, or $0.06 per share.  Pro forma EPS assumes that
 1.635 billion shares were outstanding for all periods.
     Agere Systems, formerly the Microelectronics Group of Lucent Technologies,
 recently completed its initial public offering.
     "Our second quarter results reflect continued weakness in the
 communications market," said John Dickson, president and CEO, Agere Systems.
 "Despite current conditions, we remain confident about the long-term growth
 opportunity for our business.  We are focused on realizing the benefits of
 independence and building our relationships with customers, free from
 strategic conflict.  When the market recovers, we believe we will be ideally
 positioned as the premier supplier of the optical components and integrated
 circuits fundamental to communications growth."
     Pro forma net income excludes amortization of goodwill and acquired
 intangibles, purchased in-process research and development, restructuring and
 separation charges and income tax adjustments.  Reported net loss for the
 quarter including the above items was $148 million or $0.15 per share,
 compared to net income of $65 million for the year-ago quarter or $0.06 per
 share.
     As part of an ongoing effort to align manufacturing capacity with customer
 demand and cut costs and expenses, the company will reduce its workforce
 levels.
     The majority of the positions affected are based in Agere's manufacturing
 facilities in Allentown, Breinigsville and Reading, Pa.; Irwindale, Calif. and
 Orlando, Fla.
     "We regret having to reduce the number of employees," said Dickson.
 "However, given the uncertain environment, we will continue to review our
 operations and ensure that workforce levels are consistent with business
 needs.  Through programs like outplacement services and tuition assistance as
 well as severance packages, we will seek to minimize the impact on affected
 employees."
     The majority of the employee reduction announced today is expected to be
 complete by the end of June.  Agere currently employs approximately 18,500
 people worldwide.
 
     RESULTS BY SEGMENT:
 
     Optoelectronics
     The Optoelectronics business produced revenues of $379 million during the
 second quarter, up 42 percent over the year-ago quarter, driven by growth in
 the metro and submarine product lines, as well as strong demand for
 transponders.  Revenues were down 11 percent sequentially from the first
 fiscal quarter, primarily due to continuing softness in the high-speed
 long-haul product line.
     In the second quarter, the Optoelectronics business:
 
     * Demonstrated the industry's first all-optical, three dimensional,
       MEMS-based switch component that allows manufacturers of optical
       networking systems to switch up to 64 optical signals simultaneously
       without the need to convert them into electrical form.
 
     * Introduced the industry's first 10 gigabit-per-second tunable laser
       transmitter that can deliver light on any one of 20 different
       wavelengths or colors.
 
     * Announced a family of single-fiber optical transceivers that can help
       service providers break the "last mile bottleneck" to more
       cost-effectively deliver voice, video and data services to the home,
       business or curbside distribution point.
 
     Integrated Circuits
     The Integrated Circuits business reported revenues of $812 million during
 the quarter, an increase of about 1 percent over the year-ago quarter and down
 13 percent sequentially.  The decline was due to weakened demand across the
 product offerings, with the exception of the ORiNOCO(TM) wireless local area
 networking systems, which continued to report increased sales.
     In the second quarter, the Integrated Circuits business:
 
     * Introduced the industry's first single-chip, true protocol-independent
       data transport device for OC-192 optical networks.
 
     * Unveiled a chip in Agere's Ambassador(TM) family that can nearly double
       the channel capacity of computer telephony servers and wireless base
       stations.
 
     * Announced an agreement to provide GVC with a high-speed wireless
       Internet GPRS handset system platform.
 
     Outlook
     Agere expects revenues in the June quarter to be 14 to 20 percent lower
 than in the quarter ended March 31, 2001, resulting in revenues of between
 $950 million and $1.025 billion.  The decline reflects the lower spending by
 telecommunications carriers, leading to lower demand from our customers.
 Agere expects pro forma earnings per share in its third quarter to be lower
 than in the second quarter, with a pro forma net loss of between $0.06 and
 $0.08 per share.  The company notes that current market conditions are
 characterized by uncertainty, contributing to low visibility.
 
     Earnings Webcast
     Agere Systems will host an earnings conference call today at 8:30 a.m.
 (EDT).  To listen to the conference call via the Internet, visit
 www.agere.com/investor/webcast.  If you experience problems during the
 webcast, please call 1-888-550-9829 (within the U.S.) or 1-770-225-3301
 (outside the U.S.) for technical assistance. Replay of the call will be
 available for seven days at http://www.agere.com/investor/webcast.
 
     Agere Systems Inc., formerly the Microelectronics Group of Lucent
 Technologies, is the world leader in semiconductors for communications
 applications.  Lucent has announced it intends to spin off Agere Systems as an
 independent company.  Agere Systems offers integrated optoelectronics and
 integrated circuits solutions to help customers reduce the time and expense of
 developing new communications equipment.  It also provides wireless computer
 networking solutions through its ORiNOCO(TM) product line.  More information
 about Agere Systems is available from its Web site at http://www.agere.com.
 
     This release contains forward-looking statements based on information
 available to Agere as of the date hereof.  Agere's actual results could differ
 materially from those results stated or implied by such forward-looking
 statements due to a number of risks and uncertainties.  These risks and
 uncertainties include, but are not limited to, completion of the distribution
 of Agere stock by Lucent Technologies Inc., price and product competition,
 keeping pace with technological change, dependence on new product development,
 reliance on major customers and suppliers, customer demand for our products
 and services, availability of manufacturing capacity, components and
 materials, control of costs and expenses, timely completion of employment
 reduction, general industry and market conditions and growth rates and general
 domestic and international economic conditions including interest rate and
 currency exchange rate fluctuations.  For a further discussion of these and
 other risks and uncertainties, see the prospectus filed by Agere with the
 Securities and Exchange Commission on March 28, 2001.  Agere disclaims any
 intention or obligation to update or revise any forward-looking statements,
 whether as a result of new information, future events or otherwise.
 
 
                               Agere Systems Inc.
                    Unaudited Pro Forma Operating Highlights
                                   (Millions)
 
                                                        Quarter Ended
                                                Mar 31      Dec 31      Mar 31
                                                 2001        2000        2000
 
     Revenue                                    1,191       1,362       1,067
          - Year over Year % Change               12%         41%         18%
          - Quarter over Quarter % Change        -13%         -9%         10%
 
     Pro Forma Net Income                           4         102          83
          - Year over Year % Change              -95%        -14%         N/A
          - Quarter over Quarter % Change        -96%        -55%        -30%
 
     % of Revenue
          - Gross Margin                        37.0%       42.6%       42.5%
          - SG&A                                15.0%       11.5%       12.4%
          - R&D                                 21.9%       20.3%       17.8%
          - Pro Forma Operating Income           0.1%       10.8%       12.4%
 
 
                               Agere Systems Inc.
                   Unaudited Pro Forma Results of Operations
                      (Millions except per share amounts)
 
                                                                   Six Months
                                              Quarter Ended          Ended
                                         Mar 31 Dec 31 Mar 31    Mar 31 Mar 31
                                           2001   2000   2000     2001   2000
     Revenue
        Optoelectronics                    $379   $424   $266     $803   $470
        Integrated Circuits                 812    938    801    1,750  1,563
     Total Revenue                        1,191  1,362  1,067    2,553  2,033
 
     Gross Profit - $
        Optoelectronics                     165    193    132      358    224
        Integrated Circuits                 276    387    322      663    694
     Total Gross Profit - $                 441    580    454    1,021    918
 
     Gross Profit - %
        Optoelectronics                    43.6%  45.6%  49.6%    44.7%  47.6%
        Integrated Circuits                34.0%  41.2%  40.2%    38.0%  44.4%
     Total Gross Profit - %                37.0%  42.6%  42.5%    40.0%  45.1%
     Other Costs and Expenses
     Selling, general and administrative    179    157    132      336    242
     Research and development               261    276    190      537    363
 
     Pro Forma Operating Income (Loss)
        Optoelectronics                      47     88     83      135    134
        Integrated Circuits                 (46)    59     49       13    179
     Total pro forma operating income         1    147    132      148    313
     Other income (expense) - net            16     21     (2)      37     (6)
     Interest expense                        10     24     14       34     28
     Pro forma income before provision
      for income taxes                        7    144    116      151    279
     Provision for income taxes               3     42     33       45     78
     Pro Forma Net Income                    $4   $102    $83     $106   $201
     Pro Forma Net Income per share       $0.00  $0.06  $0.05    $0.06  $0.12
     Pro Forma Weighted Average Shares    1,635  1,635  1,635    1,635  1,635
 
 
                                 Agere Systems Inc.
                Unaudited Quarterly Pro Forma Results of Operations
                        (Millions except per share amounts)
 
                                       Fiscal Year                 Fiscal Year
                                          2000                         2001
 
                              Dec 31 Mar 31 Jun 30 Sep 30  Total  Dec 31 Mar 31
                               1999   2000   2000   2000   Year    2000   2001
     Revenue
        Optoelectronics        $204   $266   $338   $393  $1,201   $424   $379
        Integrated Circuits     762    801    848  1,096   3,507    938    812
     Total Revenue              966  1,067  1,186  1,489   4,708  1,362  1,191
 
     Gross Profit - $
        Optoelectronics          92    132    167    194     585    193    165
        Integrated Circuits     372    322    353    521   1,568    387    276
     Total Gross Profit - $     464    454    520    715   2,153    580    441
 
     Gross Profit - %
        Optoelectronics        45.1%  49.6%  49.4%  49.4%   48.7%  45.6%  43.6%
        Integrated Circuits    48.8%  40.2%  41.6%  47.5%   44.7%  41.2%  34.0%
     Total Gross Profit - %    48.0%  42.5%  43.8%  48.0%   45.7%  42.6%  37.0%
 
     Other Costs and Expenses
     Selling, general
      and administrative        110    132    139    154     535    157    179
     Research and development   173    190    210    254     827    276    261
 
     Pro Forma Operating
      Income (Loss)
        Optoelectronics          51     83    106    117     357     88     47
        Integrated Circuits     130     49     65    190     434     59    (46)
     Total pro forma
      operating income          181    132    171    307     791    147      1
     Other income
      (expense) - net            (4)    (2)    16     23      33     21     16
     Interest expense            14     14     13     17      58     24     10
     Pro forma income
      before provision
      for income taxes          163    116    174    313     766    144      7
     Provision for income taxes  45     33     48     87     213     42      3
     Pro Forma Net Income      $118    $83   $126   $226    $553   $102     $4
     Pro Forma Net
      Income per share        $0.07  $0.05  $0.08  $0.14   $0.34  $0.06  $0.00
     Pro Forma Weighted
      Average Shares          1,635  1,635  1,635  1,635   1,635  1,635  1,635
 
 
                               Agere Systems Inc.
    Unaudited Condensed, Consolidated and Combined Statements of Operations
                      (Millions except per share amounts)
 
                                            Quarter Ended      Six Months Ended
                                        Mar 31  Dec 31  Mar 31  Mar 31  Mar 31
                                         2001    2000    2000    2001    2000
 
     Revenue                            $1,191  $1,362  $1,067  $2,553  $2,033
     Costs                                 750     782     613   1,532   1,115
     Gross Profit - $                      441     580     454   1,021     918
     Gross Profit - %                     37.0%   42.6%   42.5%   40.0%   45.1%
     Operating Expenses
     Selling, general and administrative   179     157     132     336     242
     Research and development              261     276     190     537     363
     Purchased in-process
      research and development               0       0      11       0      11
     Amortization of goodwill
      and other acquired intangibles       112     111       5     223      10
     Restructuring and separation expenses  36      11       0      47       0
     Total Operating Expense               588     555     338   1,143     626
     Operating Income (Loss)              (147)     25     116    (122)    292
     Other income (expense) - net           16      21      (2)     37      (6)
     Interest expense                       10      24      14      34      28
     Income (loss) before
      provision for income taxes          (141)     22     100    (119)    258
     Provision for income taxes              7      22      35      29      99
     Income (loss) before cumulative
      effect of accounting change         (148)      0      65    (148)    159
     Cumulative effect of accounting change         (4)             (4)
     Net Income (Loss)                   $(148)    $(4)    $65   $(152)   $159
     Basic and diluted
      earnings (loss) per share         $(0.15) $(0.00)  $0.06  $(0.15)  $0.15
     Average shares outstanding
      --basic and diluted                1,035   1,035   1,035   1,035   1,035
 
 
                               Agere Systems Inc.
          Unaudited Condensed, Consolidated and Combined Balance Sheet
                                   (Millions)
 
                                                    March 31       September 30
                                                       2001              2000
     ASSETS
     CURRENT ASSETS
           Cash                                         $72              $--
           Trade receivables                            637               821
           Inventories                                  629               380
           Other current assets                         215               203
                 TOTAL CURRENT ASSETS                 1,553             1,404
     Property, plant and equipment - net              2,134             1,883
     Goodwill and other acquired intangibles - net    3,285             3,491
     Other assets                                       327               289
                 TOTAL ASSETS                         7,299             7,067
 
     LIABILITIES AND INVESTED/STOCKHOLDER EQUITY
     CURRENT LIABILITIES
           Accounts payable                             464               267
           Other current liabilities                    718               709
                 TOTAL CURRENT LIABILITIES            1,182               976
     Other liabilities                                  340               310
                 TOTAL LIABILITIES                    1,522             1,286
 
     INVESTED/STOCKHOLDER EQUITY                      5,777             5,781
 
     TOTAL LIABILITIES AND
      INVESTED/STOCKHOLDER EQUITY                     7,299             7,067
 
     The Balance Sheet for the period ending March 31, 2001 does not include
 the net proceeds of the offering of $3.4 billion and the assumption of
 $2.5 billion of short-term debt by Agere from Lucent.  The actual settlement
 date for both transactions was April 2, 2001.
 
                     MAKE YOUR OPINION COUNT -- Click Here
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SOURCE Agere Systems
    ALLENTOWN, Pa., April 24 /PRNewswire Interactive Press Release/ -- Agere
 Systems (NYSE:   AGR.A), the world leader in communications semiconductors,
 today reported its financial results for the second fiscal quarter of 2001.
 The company also announced today that it would reduce its workforce by
 approximately 2,000 employees.
     Revenues for the second fiscal quarter ended March 31, 2001, were
 $1.2 billion, up 12 percent from fiscal 2000 second quarter revenues of
 $1.1 billion, and down 13 percent sequentially from first quarter 2001
 revenues of $1.4 billion.
     Pro forma net income for the second quarter was $4 million, or
 approximately breakeven per share, compared to $83 million or $0.05 per share
 in the year-ago quarter.  Pro forma net income for the first fiscal quarter
 was $102 million, or $0.06 per share.  Pro forma EPS assumes that
 1.635 billion shares were outstanding for all periods.
     Agere Systems, formerly the Microelectronics Group of Lucent Technologies,
 recently completed its initial public offering.
     "Our second quarter results reflect continued weakness in the
 communications market," said John Dickson, president and CEO, Agere Systems.
 "Despite current conditions, we remain confident about the long-term growth
 opportunity for our business.  We are focused on realizing the benefits of
 independence and building our relationships with customers, free from
 strategic conflict.  When the market recovers, we believe we will be ideally
 positioned as the premier supplier of the optical components and integrated
 circuits fundamental to communications growth."
     Pro forma net income excludes amortization of goodwill and acquired
 intangibles, purchased in-process research and development, restructuring and
 separation charges and income tax adjustments.  Reported net loss for the
 quarter including the above items was $148 million or $0.15 per share,
 compared to net income of $65 million for the year-ago quarter or $0.06 per
 share.
     As part of an ongoing effort to align manufacturing capacity with customer
 demand and cut costs and expenses, the company will reduce its workforce
 levels.
     The majority of the positions affected are based in Agere's manufacturing
 facilities in Allentown, Breinigsville and Reading, Pa.; Irwindale, Calif. and
 Orlando, Fla.
     "We regret having to reduce the number of employees," said Dickson.
 "However, given the uncertain environment, we will continue to review our
 operations and ensure that workforce levels are consistent with business
 needs.  Through programs like outplacement services and tuition assistance as
 well as severance packages, we will seek to minimize the impact on affected
 employees."
     The majority of the employee reduction announced today is expected to be
 complete by the end of June.  Agere currently employs approximately 18,500
 people worldwide.
 
     RESULTS BY SEGMENT:
 
     Optoelectronics
     The Optoelectronics business produced revenues of $379 million during the
 second quarter, up 42 percent over the year-ago quarter, driven by growth in
 the metro and submarine product lines, as well as strong demand for
 transponders.  Revenues were down 11 percent sequentially from the first
 fiscal quarter, primarily due to continuing softness in the high-speed
 long-haul product line.
     In the second quarter, the Optoelectronics business:
 
     * Demonstrated the industry's first all-optical, three dimensional,
       MEMS-based switch component that allows manufacturers of optical
       networking systems to switch up to 64 optical signals simultaneously
       without the need to convert them into electrical form.
 
     * Introduced the industry's first 10 gigabit-per-second tunable laser
       transmitter that can deliver light on any one of 20 different
       wavelengths or colors.
 
     * Announced a family of single-fiber optical transceivers that can help
       service providers break the "last mile bottleneck" to more
       cost-effectively deliver voice, video and data services to the home,
       business or curbside distribution point.
 
     Integrated Circuits
     The Integrated Circuits business reported revenues of $812 million during
 the quarter, an increase of about 1 percent over the year-ago quarter and down
 13 percent sequentially.  The decline was due to weakened demand across the
 product offerings, with the exception of the ORiNOCO(TM) wireless local area
 networking systems, which continued to report increased sales.
     In the second quarter, the Integrated Circuits business:
 
     * Introduced the industry's first single-chip, true protocol-independent
       data transport device for OC-192 optical networks.
 
     * Unveiled a chip in Agere's Ambassador(TM) family that can nearly double
       the channel capacity of computer telephony servers and wireless base
       stations.
 
     * Announced an agreement to provide GVC with a high-speed wireless
       Internet GPRS handset system platform.
 
     Outlook
     Agere expects revenues in the June quarter to be 14 to 20 percent lower
 than in the quarter ended March 31, 2001, resulting in revenues of between
 $950 million and $1.025 billion.  The decline reflects the lower spending by
 telecommunications carriers, leading to lower demand from our customers.
 Agere expects pro forma earnings per share in its third quarter to be lower
 than in the second quarter, with a pro forma net loss of between $0.06 and
 $0.08 per share.  The company notes that current market conditions are
 characterized by uncertainty, contributing to low visibility.
 
     Earnings Webcast
     Agere Systems will host an earnings conference call today at 8:30 a.m.
 (EDT).  To listen to the conference call via the Internet, visit
 www.agere.com/investor/webcast.  If you experience problems during the
 webcast, please call 1-888-550-9829 (within the U.S.) or 1-770-225-3301
 (outside the U.S.) for technical assistance. Replay of the call will be
 available for seven days at http://www.agere.com/investor/webcast.
 
     Agere Systems Inc., formerly the Microelectronics Group of Lucent
 Technologies, is the world leader in semiconductors for communications
 applications.  Lucent has announced it intends to spin off Agere Systems as an
 independent company.  Agere Systems offers integrated optoelectronics and
 integrated circuits solutions to help customers reduce the time and expense of
 developing new communications equipment.  It also provides wireless computer
 networking solutions through its ORiNOCO(TM) product line.  More information
 about Agere Systems is available from its Web site at http://www.agere.com.
 
     This release contains forward-looking statements based on information
 available to Agere as of the date hereof.  Agere's actual results could differ
 materially from those results stated or implied by such forward-looking
 statements due to a number of risks and uncertainties.  These risks and
 uncertainties include, but are not limited to, completion of the distribution
 of Agere stock by Lucent Technologies Inc., price and product competition,
 keeping pace with technological change, dependence on new product development,
 reliance on major customers and suppliers, customer demand for our products
 and services, availability of manufacturing capacity, components and
 materials, control of costs and expenses, timely completion of employment
 reduction, general industry and market conditions and growth rates and general
 domestic and international economic conditions including interest rate and
 currency exchange rate fluctuations.  For a further discussion of these and
 other risks and uncertainties, see the prospectus filed by Agere with the
 Securities and Exchange Commission on March 28, 2001.  Agere disclaims any
 intention or obligation to update or revise any forward-looking statements,
 whether as a result of new information, future events or otherwise.
 
 
                               Agere Systems Inc.
                    Unaudited Pro Forma Operating Highlights
                                   (Millions)
 
                                                        Quarter Ended
                                                Mar 31      Dec 31      Mar 31
                                                 2001        2000        2000
 
     Revenue                                    1,191       1,362       1,067
          - Year over Year % Change               12%         41%         18%
          - Quarter over Quarter % Change        -13%         -9%         10%
 
     Pro Forma Net Income                           4         102          83
          - Year over Year % Change              -95%        -14%         N/A
          - Quarter over Quarter % Change        -96%        -55%        -30%
 
     % of Revenue
          - Gross Margin                        37.0%       42.6%       42.5%
          - SG&A                                15.0%       11.5%       12.4%
          - R&D                                 21.9%       20.3%       17.8%
          - Pro Forma Operating Income           0.1%       10.8%       12.4%
 
 
                               Agere Systems Inc.
                   Unaudited Pro Forma Results of Operations
                      (Millions except per share amounts)
 
                                                                   Six Months
                                              Quarter Ended          Ended
                                         Mar 31 Dec 31 Mar 31    Mar 31 Mar 31
                                           2001   2000   2000     2001   2000
     Revenue
        Optoelectronics                    $379   $424   $266     $803   $470
        Integrated Circuits                 812    938    801    1,750  1,563
     Total Revenue                        1,191  1,362  1,067    2,553  2,033
 
     Gross Profit - $
        Optoelectronics                     165    193    132      358    224
        Integrated Circuits                 276    387    322      663    694
     Total Gross Profit - $                 441    580    454    1,021    918
 
     Gross Profit - %
        Optoelectronics                    43.6%  45.6%  49.6%    44.7%  47.6%
        Integrated Circuits                34.0%  41.2%  40.2%    38.0%  44.4%
     Total Gross Profit - %                37.0%  42.6%  42.5%    40.0%  45.1%
     Other Costs and Expenses
     Selling, general and administrative    179    157    132      336    242
     Research and development               261    276    190      537    363
 
     Pro Forma Operating Income (Loss)
        Optoelectronics                      47     88     83      135    134
        Integrated Circuits                 (46)    59     49       13    179
     Total pro forma operating income         1    147    132      148    313
     Other income (expense) - net            16     21     (2)      37     (6)
     Interest expense                        10     24     14       34     28
     Pro forma income before provision
      for income taxes                        7    144    116      151    279
     Provision for income taxes               3     42     33       45     78
     Pro Forma Net Income                    $4   $102    $83     $106   $201
     Pro Forma Net Income per share       $0.00  $0.06  $0.05    $0.06  $0.12
     Pro Forma Weighted Average Shares    1,635  1,635  1,635    1,635  1,635
 
 
                                 Agere Systems Inc.
                Unaudited Quarterly Pro Forma Results of Operations
                        (Millions except per share amounts)
 
                                       Fiscal Year                 Fiscal Year
                                          2000                         2001
 
                              Dec 31 Mar 31 Jun 30 Sep 30  Total  Dec 31 Mar 31
                               1999   2000   2000   2000   Year    2000   2001
     Revenue
        Optoelectronics        $204   $266   $338   $393  $1,201   $424   $379
        Integrated Circuits     762    801    848  1,096   3,507    938    812
     Total Revenue              966  1,067  1,186  1,489   4,708  1,362  1,191
 
     Gross Profit - $
        Optoelectronics          92    132    167    194     585    193    165
        Integrated Circuits     372    322    353    521   1,568    387    276
     Total Gross Profit - $     464    454    520    715   2,153    580    441
 
     Gross Profit - %
        Optoelectronics        45.1%  49.6%  49.4%  49.4%   48.7%  45.6%  43.6%
        Integrated Circuits    48.8%  40.2%  41.6%  47.5%   44.7%  41.2%  34.0%
     Total Gross Profit - %    48.0%  42.5%  43.8%  48.0%   45.7%  42.6%  37.0%
 
     Other Costs and Expenses
     Selling, general
      and administrative        110    132    139    154     535    157    179
     Research and development   173    190    210    254     827    276    261
 
     Pro Forma Operating
      Income (Loss)
        Optoelectronics          51     83    106    117     357     88     47
        Integrated Circuits     130     49     65    190     434     59    (46)
     Total pro forma
      operating income          181    132    171    307     791    147      1
     Other income
      (expense) - net            (4)    (2)    16     23      33     21     16
     Interest expense            14     14     13     17      58     24     10
     Pro forma income
      before provision
      for income taxes          163    116    174    313     766    144      7
     Provision for income taxes  45     33     48     87     213     42      3
     Pro Forma Net Income      $118    $83   $126   $226    $553   $102     $4
     Pro Forma Net
      Income per share        $0.07  $0.05  $0.08  $0.14   $0.34  $0.06  $0.00
     Pro Forma Weighted
      Average Shares          1,635  1,635  1,635  1,635   1,635  1,635  1,635
 
 
                               Agere Systems Inc.
    Unaudited Condensed, Consolidated and Combined Statements of Operations
                      (Millions except per share amounts)
 
                                            Quarter Ended      Six Months Ended
                                        Mar 31  Dec 31  Mar 31  Mar 31  Mar 31
                                         2001    2000    2000    2001    2000
 
     Revenue                            $1,191  $1,362  $1,067  $2,553  $2,033
     Costs                                 750     782     613   1,532   1,115
     Gross Profit - $                      441     580     454   1,021     918
     Gross Profit - %                     37.0%   42.6%   42.5%   40.0%   45.1%
     Operating Expenses
     Selling, general and administrative   179     157     132     336     242
     Research and development              261     276     190     537     363
     Purchased in-process
      research and development               0       0      11       0      11
     Amortization of goodwill
      and other acquired intangibles       112     111       5     223      10
     Restructuring and separation expenses  36      11       0      47       0
     Total Operating Expense               588     555     338   1,143     626
     Operating Income (Loss)              (147)     25     116    (122)    292
     Other income (expense) - net           16      21      (2)     37      (6)
     Interest expense                       10      24      14      34      28
     Income (loss) before
      provision for income taxes          (141)     22     100    (119)    258
     Provision for income taxes              7      22      35      29      99
     Income (loss) before cumulative
      effect of accounting change         (148)      0      65    (148)    159
     Cumulative effect of accounting change         (4)             (4)
     Net Income (Loss)                   $(148)    $(4)    $65   $(152)   $159
     Basic and diluted
      earnings (loss) per share         $(0.15) $(0.00)  $0.06  $(0.15)  $0.15
     Average shares outstanding
      --basic and diluted                1,035   1,035   1,035   1,035   1,035
 
 
                               Agere Systems Inc.
          Unaudited Condensed, Consolidated and Combined Balance Sheet
                                   (Millions)
 
                                                    March 31       September 30
                                                       2001              2000
     ASSETS
     CURRENT ASSETS
           Cash                                         $72              $--
           Trade receivables                            637               821
           Inventories                                  629               380
           Other current assets                         215               203
                 TOTAL CURRENT ASSETS                 1,553             1,404
     Property, plant and equipment - net              2,134             1,883
     Goodwill and other acquired intangibles - net    3,285             3,491
     Other assets                                       327               289
                 TOTAL ASSETS                         7,299             7,067
 
     LIABILITIES AND INVESTED/STOCKHOLDER EQUITY
     CURRENT LIABILITIES
           Accounts payable                             464               267
           Other current liabilities                    718               709
                 TOTAL CURRENT LIABILITIES            1,182               976
     Other liabilities                                  340               310
                 TOTAL LIABILITIES                    1,522             1,286
 
     INVESTED/STOCKHOLDER EQUITY                      5,777             5,781
 
     TOTAL LIABILITIES AND
      INVESTED/STOCKHOLDER EQUITY                     7,299             7,067
 
     The Balance Sheet for the period ending March 31, 2001 does not include
 the net proceeds of the offering of $3.4 billion and the assumption of
 $2.5 billion of short-term debt by Agere from Lucent.  The actual settlement
 date for both transactions was April 2, 2001.
 
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 SOURCE  Agere Systems